(Exercise 2.22) A bill for $100 is purchased for $94 five months before it is due. Find:a) The nominal rate of discount convertible once every two months earned by the purchaser.ANSWER = 6.38%.h) The annual effective rate of interest earned by the purchaser.ANSWER =28.08%.

The effective annual rate is the rate at which the future value is computed.

Answered: (Exercise 2.22) A bill for $100 is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Ricky Ripov’s Pawn Shop charges an interest rate of 18.25 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. a. What rate should the shop report? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
PLEASE Use the correct function on EXCEL
Answer
You get a new credit card from your bank. The document that comes with the card informs you that the interest rate on that card is 19.1% APR. What is the effective annual rate you'll actually be paying? The credit card company uses monthly compounding of interest. Enter your answer as a percentage, rounded to 2 decimals, and without the percentage sign ('%'). For example, if your answer is 0.23456, then enter 23.46 21.98
An amount of $1632 is borrowed at a discount interest rate of 8% and the length of the loan is 4 months. Then the discount amount willI be: O 23.94 O 65.28 O 43.52 O 10.88 O 97.92
To borrow $2,400, you are offered an add-on interest loan at 10.4 percent with 12 monthly payments. Compute the 12 equal payments. Use the amount you borrowed and the monthly payments you computed to calculate the APR of the loan. Then, use that APR to compute the EAR of the loan. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Equal payment Effective annual rate. %
The loan below was paid in full before its due date. (a) Obtain the value of h from the annual percentage rate table. Then (b) use the actuarial method to find the amount of unearned interest, and (c) find the payoff amount. Regular Monthly Payment $445.22 Remaining Number of Scheduled Payments after Payoff 6 APR 11.0% Click the icon to view the annual percentage rate table. (a) h=$ (b) The unearned interest is $ (c) The payoff amount is $ (Round to the nearest cent as needed.) (Round to the nearest cent as needed.)
A firm offers terms of 1.2/10, net 60. a. What effective annual interest rate does the firm earn when a customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What effective annual interest rate does the firm earn if the terms are changed to 2.2/10, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What effective annual interest rate does the firm earn if the terms are changed to 1.2/10, net 75, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d. What effective annual interest rate does the firm earn if the terms are changed to 1.2/15, net 60, and the customer does not…
Investigate the effect of the term on simple interest amortized auto loans by finding the monthly payment and the total interest for a loan of $10,000 at 7 and 7/8% interest if the term is the following. (Round all answers to the nearest cent.) (a) 3 years. Payment $312.79 Total interest $ 1260.34 (b) 4 years. Payment $ 243.54 Total interest $ (c) 5 years. Payment Total interest $ $ 202.17 X
The loan below was paid in full before its due date: (a). Obtain the value of h from the annual percentage rate table. Then (b) use the actuarial method to find the amount of unearned interest, and (c) find the payoff amount. Regular Monthly Payment $494.14 APR 4.0% Remaining Number of Scheduled Payments after Payo!! 12 Click the icon to view the annual percentage rate table. (b) The unearned interest is (Round to the nearest cent as needed) (c) The payoff amount is $(Round to the nearest cent as needed)
Suppose you have received a credit card offer from a bank that charges interest at 1.1% per quarter, compounded quarterly. What is the nominal interest (annual percentage) rate for this credit card? What is the effective annual interest rate? The nominal interest (annual percentage) rate for this credit card is %. (Round to one decimal place.)
Big Dom’s Pawn Shop charges an interest rate of 26.8 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. a. What rate should the shop report? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) b. What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

(Exercise 2.22) A bill for $100 is purchased for $94 five months before it is due. Find: a) The nominal rate of discount convertible once every two months earned by the purchaser. ANSWER = 6.38 %. h) The annual effective rate of interest earned by the purchaser. ANSWER = 28.08 %.